Power Privatisation: Foreign Banks Pile Pressure on Nigerian Lenders

Festus Akanbi
A strong indication emerged at the weekend that as the nation awaits the timetable for the next phase of the ongoing power sector privatisation, some Nigerian banks have come under pressure from a number of foreign financial institutions angling to participate in the financing of the power projects as financial partners.

The recent approval of preferred bidders for Power Holding Company of Nigeria (PHCN’s) successor Generating Companies (GENCOs) and successor Distribution Companies (DISCOs) by the National Council on Privatisation (NCP) had paved the way for the take-off of the power projects, a development which the foreign financial institutions are said to be lapping on.

THISDAY checks showed that while some Nigerian money deposit banks are busy evaluating some of the proposals forwarded by some of the bidders for financing, some foreign financial institutions have expressed their readiness to pull their weights in the power sector project financing.

Financial analysts said Nigeria has become an investment destination for foreign financial institutions as a result of the perceived lack of depth of local lenders to foot the bill of power sector projects and the favourable investment climate in the country in recent times.

Speaking on the progress made so far on the ongoing power sector privatisation, Managing Director/Chief Executive, First Bank Nigeria Plc, Mr. Bisi Onasanya, said there are foreign development financial institutions which have indicated their interest in being part of the power project financing in Nigeria.

He confirmed that a number of winners of the bids for the power projects had approached First Bank for financing, but said, however, that the bank is taking its time to ensure that only credible ones are given audience.

He said: “For projects that First Bank believes in, financing or funding the transactions will not be a challenge. We have the biggest balance sheet in Nigeria, we have the biggest loan book in Nigeria, and so what is appropriate in terms of financing structure will be put in place. For some of the transactions, we would finance alone and for some of the transactions, we already have parties outside Nigeria who are waiting to partner with First Bank in doing the large deals. What is important is to make sure that we pool our resources together. Banking has become globalised. So these transactions are not just available today for Nigerian banks, there are foreign development financial institutions which are also waiting because they want to be part of the transactions.”

According to him, the bank has even gone a step ahead to raise preferred bidders bonds for a number of consortia that met the requirements for the bank’s partnership although he declined to name the affected organisations.

“Customer confidentiality will not permit me to name them. The stage in which the process is today is that the preferred bidders are required to post a preferred bidders bond, that’s to say they are able to pay. I have been with a couple of consortia for which we have issued that preferred bidders guarantee and we are going ahead to raise the payment,” Onasanya said.

He disclosed that First Bank would solely handle the financing of some of the projects, explaining however that partnership with foreign financial institutions would be needed for a number of the projects as events unfold.

The bank’s chief said the partnership might be beyond mere funding of the projects, explaining that it would also be in the technical aspects of the projects.

“What we are putting on the table with the consortia we are dealing with is not just funding. We are also involved in the technical side of it and so it’s not just First Bank alone that is involved in this, we are also hand-holding them with our investment banking arm in providing financial advisory services to some of them.

“We are not just into it today to assist them in getting those assets under the procurement arrangement. We want to be there with them in terms of putting in necessary structures for capital expenditure commitment that they require and appropriate management to make sure that the operations are drawn in a very efficient manner and that there is synergy,” he explained further.

The privatisation of the power sector took a shape with the creation of Power Holding Company of Nigeria (PHCN) the initial holding company), which was subsequently unbundled into 18 successor companies.

Strategically, the objectives of the reform include the transfer of management and financing of the sector operations to the organised private sector; the establishment of an independent and effective regulatory commission to oversee and monitor the industry; and focusing the FGN on policy formulation and long-term development of the industry.

The measure was expected to lead to increased access to electricity services; improved efficiency, affordability, reliability and quality of services; and greater investment into the sector to stimulate economic growth.

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